Shares of railroad equipment provider Westinghouse Air Brake Technologies Corp. could rise as much as 20 percent as robust growth in the global mass-transit market offsets a recent slump in freight volumes, Barron's said.
Last year, Westinghouse reported its first annual decline in earnings since 2009, largely because of weak freight volumes. Its stock has declined 2 percent in the past six months, even as the S&P 500 saw roughly 9 percent gains.
Westinghouse's recent acquisitions have boosted its exposure to the faster-growing mass-transit market, which will comprise around 60 percent of its sales this year, Barron's said. That will eventually help it boost its revenues, restoring its stock price, Barron's said.
In 2016, it purchased European rival Faiveley Transport for $1.7 billion. It has made more than 50 acquisitions in the past decade.
The mass-transit market has grown at an annual rate of 4 to 5 percent in recent years and is expected to continue growing quickly as emerging economies invest more in public transit and Europe makes a renewed push for energy efficiency, Barron's said.
Between the immediate benefits of integrating Faiveley and the longer-term benefits of more exposure to mass transit and Europe, Westinghouse could see annual sales growth jump from low to mid-single digits, Barron's said, citing T. Rowe Price analyst Andrew Davis.
The freight business is expected to pick up, partly because of a bottoming out of recent declines in coal volumes, Barron's said.
An increase in the use of automated trains could also boost demand for Westinghouse's anti-collision technology, called positive train control, or PTC, Barron's added.
The company's shares closed at $79.01 on Thursday.